An Investor Will Generally Find That Hiring an Investment Firm

question 84

Multiple Choice

An investor will generally find that hiring an investment firm to actively manage his or her portfolio will

• A)result in a higher return than would be received from an index mutual fund.
• B)be less expensive than simply placing money in an index mutual fund.
• C)result in a higher return, but will be more expensive than placing money in an index mutual fund.
• D)result in about the same return, but be more expensive than placing money in an index mutual fund.

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Definitions:

Larger Percentage Increase

A situation where the rate of increase in a particular variable is higher relative to other comparable measures or periods.

Average Costs

The total cost of production divided by the number of units produced, giving the cost per unit of production.

Diminishing Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase and may even decrease.

Diseconomies of Scale

A phenomenon where production costs per unit increase as a firm's output increases, often due to inefficiencies that arise when companies become too large.